Newspaper article THE JOURNAL RECORD

Economists Are in Quandry over Estimates of Growth

Newspaper article THE JOURNAL RECORD

Economists Are in Quandry over Estimates of Growth

Article excerpt

NEW YORK - During the first two months of this year, many economists became steadily upbeat about the outlook for the nation's e conomy. Their growth estimates rose as the dollar and oil prices fell, until their consensus neared the Reagan administration's optimistic projection that the economy would expand at a healthy rate of 4 percent.

In the past few weeks, however, the doubts many economists harbored earlier have been resurrected by gloomy unemployment and production statistics, dismal trade figures, weak reports of retail sales and discouraging news from such blue-chip companies as the General Motors Corporation and the International Business Machines Corporation.

""There's no concrete sign of recession, but you can say that there are an awful lot of troubling elements out there,'' said Rudolph Oswald, the chief economist in Washington for the AFL-CIO.

""You can't let the financial markets fool you,'' said one of the more pessimistic economists, Samuel Nakagama of the New York consulting firm of Nakagama & Wallace Inc., referring to soaring stockprices. On Friday the Dow Jones industrial average jumped 39.03 points, to a record 1,792.74. It capped a rise for the week of 92.91 points, making it the largest gain ever achieved in a five-day period.

Analysts attributed Friday's surge to government statistics showing that producer prices and industrial development fell in February, leading investors to believe that those signs of a weakening economy would encourage the Federal Reserve Board to push interest rates lower.

""Interest rates wouldn't be falling this way if the economy were as strong as some people say,'' Nakagama said. ""The most probable development is a rebound in the second half of the year, but I think the situation is fairly serious.''

Economists are wary of reading trends into monthly statistics, particularly those from the winter months when severe weather can play havoc with normal activity. Nevertheless, many forecasters who had raised their growth estimates on the basis of various indicators of economic activity that were published in January and early February are now reversing themselves or planning to do so soon.

These second thoughts have not led to predictions that the four-year-old recovery will come to an end. Indeed, falling oil prices and the lower foreign-exchange value of the dollar, coupled with a reduction in inflation and interest rates, add up to good prospects for continuing long-term growth. …

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